Answer:
Value of closing Inventory under absorption costing = $56,610
Explanation:
Provided sales for the month = $902,000 a the rate of $22 per unit.
That means sales in units = $902,000/ $22 = 41,000 units.
Provided opening stock of finished goods = 8,770 units
Production for the month of November = 35,560 units
Closing inventory = Opening + Manufactured - Sales
= 8,770 + 35,560 - 41,000 = 3,330
Under absorption costing only manufacturing overheads are added to the cost of goods, operating expenses like selling & administrative do not form part of that.
Variable cost of goods sold do not include operating expenses, as variable selling expenses are provided separately.
Therefore cost of goods sold per unit = $574,000/41,000 = $14 per unit.
Variable selling expenses will not form part of value of closing inventory under absorption costing.
Fixed manufacturing expenses will be considered fully with the production quantity of 35,560 units as no production capacity has been provided.
Manufacturing fixed cost per unit = $106,680/35,560 = $3 per unit
Value of closing Inventory = Cost of goods sold per unit + Fixed cost per unit allocated
= ($14 X 3,330) + ($3 X 3,330) = $56,610
